Grab an Earnings trade in Panera win a Free Lunch

• Posted by Greg Harmon
• on October 27th, 2015

Panera, $PNRA, had a strong run higher from August 2014 through to February 2015. Knocked back then it consolidated and jumped higher in April, leaving an Island reversal gap. The stock jumped higher again in July, only to pullback, filling the gap as it followed the market down in August. It found support at the 200 day SMA and started back higher to get knocked back at 200 to that 200 day SMA again.

There are a couple of important pieces of information in that past 13 months of price action. First, the 200 day SMA has acted as support many times. Second, there have been large dislocated moves on earnings. Heading into the report tonight after the close the stock is moving lower after rejecting at the 20 day SMA. The RSI is falling and turning bearish while the MACD is leveling after a fall.

There is support lower at 185 and 180 followed by 175 and 172 before a gap to fill to 166. There is resistance above at 190 and 200 followed by 203 and 206. The reaction to the last 6 earnings reports has been a move of about 5.92% on average or $11.00 making for an expected range of 175 to 197.

The at-the money November Straddles suggest a larger $15.25 move by Expiry with Implied Volatility at 38% above the December at 30%. Short interest is elevated at 8.5%. Open interest is spread on the Put side from 170 to 185 with size at 190 above then 200 and 210 on the Call side.

Panera, $PNRA

Trade Idea 1: Buy the November 185/190 Call Spread for $2.50.
Looking for large open interest to pull the stock higher.

Trade Idea 2: Buy the November 190/195-200 1×2 Call Spread for free.
Looking for large open interest to draw the price higher, and to stall the stock near 200 again.

Trade Idea 3: Buy the November 190/195 Call Spread and sell the November 170 Put for free.
Leveraging the Call Spread with a short put outside of the options expected range and below that 200 day SMA.

Trade Idea 4: Sell the November 170/200 Strangle for a $5.00 credit.
Profitable on a close at Expiry between 165 and 205, this spread is well outside of the expected and historical range.

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